While looking to invest, it is always advisable to be informed about the various investment scenarios in the market. Given the government’s continued thrust on infrastructure development, and record budget allocation for the infrastructure sector, InvITs are in focus.
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So, what are InvITs? Let’s a look a 5 simple points to understand InvITs:
InvIT, short for Infrastructure Investment Trust, is a pooled investment scheme facilitating direct investment in infrastructure ventures, allowing investors to reap returns in the form of a share of the generated income.
These trusts typically allocate funds into income-generating assets like roads, highways, and various high-value infrastructure projects.
The primary aim of InvITs is to bolster India’s infrastructure sector by fostering increased investment.
Units of InvITs are publicly listed on stock exchanges, offering investors liquidity and tradability.
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However, it’s crucial to note that InvITs come with inherent risks, including project failures, as well as political and regulatory uncertainties.
What is the framework of an InvIT?
InvITS are like mutual funds in structure. An InvIT typically involves four key entities: sponsors, investment managers, project managers, and trustees. The formation of InvITs adheres to the Sebi Infrastructure Investment Trust Regulations of 2014. The infrastructure company seeking public funding establishes this trust and then designates an investment manager responsible for overseeing the management of the InvIT’s assets and investments.
Additionally, there is a project manager tasked with executing the projects, overseen by the investment manager. Lastly, as the InvIT functions as a trust, the company appoints a trustee whose role includes ensuring compliance of the InvIT, investment manager, and project manager with Sebi regulations.
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With inputs from Centre for Investment Education and Learning content which appeared in Economic Times
